Subsidising environmental destruction in India

Writing about the debate over the Nano, the Rupees 1 lakh (approximately US$ 2500) car launched by the Tata Motor Company, Sunita Narain says:

There is no doubt that any car that is small is better than a big car in terms of fuel economy and emissions. There is also no doubt that affordable cars are better than expensive ones. But the question is in what direction is Nano leading us. The issue is not small, cheap cars or big, expensive cars, but all cars. The issue is whether it is helping mobility and at what price.

Let's take the 'affordability' question first. The fact is that cars — small or big — are heavily subsidized. The problem is that when economists (including those who run the government) fret and fume about mounting subsidy bills, they think of farmers — fertilizer, electricity and food — not our cars. But subsidy is what they unquestionably get.

The subsidy begins with the manufacture of cars. When we read about the Singur farmers' struggle to stop government from acquiring their land for the Tata car factory we don't join the dots. We don't see this as the first big subsidy to motorization. The fact is, in Singur the manufacturer got cheap land, interest-free capital and perhaps other concessions — the Left Front government in West Bengal never made public full details of its attractive package. This brought down the cost of production and allowed the manufacturer to price the Nano at Rs 1 lakh. But this is not only about Tata or Singur. The fact is that, to compete, every manufacturer needs the same, if not better, package of benefits. The fact also is that every state government is competing to offer sweeter deals. We know that in the now contested special economic zones of Goa, the government had agreed to give industry all this and 15 years of electricity free of cost. We also know if West Bengal did not bend to please, Uttarakhand was waiting to entice the Tatas. In other words, we are certainly not paying the cost of manufacture of our cars, not to mention the full cost of running or parking them.

The car owner (and I am one as well) pays a one-time road tax, which is between 0.5-5 percent of the cost of the vehicle in most states. The bus pays an annual road tax and it also pays a passenger tax based on the number of people it carries — call it a penalty for efficiency as it moves more people, takes less road space and so emits less and consumes less fuel per passenger.

But this is only one part of the subsidies to car owners. There is also the cost of regulating traffic; of installing traffic signals; the cost of building flyovers, overbridges and subways; the cost of pollution control measures; the cost of pollution to our health. Since cars take up over 75 percent of the road space, even though they move less than 20 percent of the people, it is obvious whom this expenditure benefits the most. ...

The subsidy bill does not end here. There is also the cost of parking, which we refuse to pay any or full cost for, and which the government refuses to impose. But we forget or do not see that in our cities the largest number of people take the bus or cycle or walk to work or shop. The bus has not been replaced by the car, it has only been marginalized. In simple terms, this means that buses have no space to move — in all cities they crawl, commuters cannot reach destinations in time, and accidents keep getting worse as space constraints grow.

The question is should we discount the price of motorization so that some (and maybe a few more) can drive a car or a two-wheeler? Or should we pay the real cost of our commute so that the government can invest in mobility for all? The fact is that the government cannot afford to subsidize cars for all. Nor can it afford to invest in both cars and buses. Ultimately, it is not about economics. It is about politics and the imagination needed to build cities in which mobility does not mean cars. Flyovers can be built, but only if we know where they will lead. Source

My thoughts exactly.